"With Marvell facing secular challenges on its core chip business, this acquisition is a smart strategic move which puts the company in a stronger competitive position for the coming years," said GBH Insights analyst Daniel Ives.

Marvell, which has been trying to diversify from its storage devices business, had come under pressure from Starboard Value last year, when the activist investor called the company undervalued.

"This is an exciting combination of two very complementary companies that together equal more than the sum of their parts," Marvell's Chief Executive Matt Murphy said in a statement.

Marvell plans to fund the deal with a combination of cash on hand from the combined companies and $1.75 billion in debt financing, the company said.

Earlier this month, chipmaker Qualcomm rejected rival Broadcom's $103-billion takeover bid, one of the biggest ever in technology dealmaking. Goldman Sachs was the financial adviser to Marvell while Qatalyst Partners and J.P. Morgan Securities were the financial advisers to Cavium.